Question

What mix of ownership, location, and internalization advantages would encourage a company to hire Borderfree?

Answer 1

The ownership-location-internalization model provides a wider picture framework for organizing the thoughts on hiring border-free. The condition of ownership states that the companies own some asset such as a patent, blueprint, or copyright that generates enough value to make it worth the additional cost for border-free. The location should cut the tariff costs and save in transportation. The internalization benefits will arise when the firm benefits from keeping the border-free expansion within the firm.

If all the conditions of ownership, location, and internalization are met in an efficient way it will be beneficial to organize it as a multinational. However when one condition is not fulfilled, it would be most beneficial to organize in a different approach.

-- When the location advantage is not met, the firm could produce in its home nation and serve the exports to the other markets.

-- When the internalization advantage is not met, the firm may license its production process to a separate foreign firm who is doing the production of the product or service.

-- When the ownership advantage is not met, it will be difficult for the firm to produce enough value for existing at all